Dyson: Lessons for the British economy

Amidst all the gloom, the results of Dyson - the designer and manufacturer of all those sleek and efficient consumer electricals - were impressive.

In low-growth UK, Dyson has been hiring, deploying £45m a year in research and development, and investing in new technologies that won't become commercial for five to ten years.

The group's research and development priority right now is something called "digital motor technology", on which 70 motor specialists are currently working (digital motors are apparently much faster and more efficient than conventional engines).

Dyson's reward has been record financial results. Sales rose more than 15% to £886.5m last year. And in spite of a remarkably sharp 30% rise in administrative expenses to £315m, pre tax profits were 21% higher at £198m.

"If only we had more Dysons" is the lament you will have heard from most senior politicians over the past decade or so - but especially since the great crash of 2007-8, when the risks of the UK's dependence on banking and financial services to deliver economic growth was exposed.

Factory future?

Here are the good things about Dyson.

Its success means an increase in high-skilled employment in Britain: last year it hired 200 engineers, to take its roster of engineers at Malmesbury in Wiltshire to 550; and its target is 700 engineers by the end of 2011.

Those graduating in engineering join Dyson with a starting salary of £25,200 and a joining bonus of up to £3000 - which is a decent living from the off, and is an incentive for those currently studying engineering or a science degree to consider applying those skills in British industry, rather than going straight into a hedge fund.

Also Dyson paid £50m of taxes to the British exchequer and £4m to charity.

All that said, it's the brainy stuff that Dyson does in the UK. The making and assembling takes place in other parts of the world.

In some ways it is similar to that other great British technological success story, Arm - which designs the chips that are in gazillions of smartphones, tablets and hi-tech electronics, but which licences its technologies and manufactures nothing.

For years that has been the trend in the shrinking part of the British economy that produces things rather than services: it has tended to concentrate on the intellectual side of manufacturing and producing, the knowhow, the ideas; but the jobs in making and assembling have gravitated to Asia, Eastern Europe, Turkey and other places where it can all be done so much cheaper.

It was a question of survival. In many ways manufacturers did brilliantly in the decade before the recession of 2008/9, given that the brightest and brainiest young talent was going into the City and strong sterling, buoyed up by the strength of financial services, made British exports expensive.

In these boom years for the British economy - which we know were built on dangerously unsafe foundations - manufacturers' share of British GDP may have shrunk and employment in British manufacturing may have dwindled. But absolute sales and profits of British manufacturers rose.

So here is the question. As we rebalance our economy from one fuelled less by debt, from one less reliant on financial services, from one less dependent on consumption and more geared to towards investment and exports, where will the jobs come for those of our young people who will never be boffins, or best-selling authors, or premier-league footballers?

Who is going to deny that it would be great to have more Dysons, Arms, GlaxoSmithKlines and so on. But if the great retailing bonanza is over, does the UK also need a few more factories?

Labour would reduce tax relief for those earning £150,000 or more a year, shrink maximum pension pots to £1m and cut maximum annual pension contributions to £30,000 to pay for a cut to £6,000 in student fees.

Comments

Comment number 229.

jizzlingtons17th August 2011 - 16:57

218.virtualsilverlady

Nissan can assemble cars here becuase the cost of manufacturing a car, including labour costs, are relatively small compared with the preliminary research, development, tooling, testing, legislation costs etc. which are astronmical. The same cannot be said for the manufacture of vacuum cleaners and other relatviely low cost products.

Of course this just highlights the type of things that would be suitable for manufacture here, high end high tech goods.

Comment number 228.

davidbrent17th August 2011 - 16:51

155. alan_addison

"...for things that are only produced in low quantities the wage element is not so important. Also these products tend to require higher skilled assemblers. These factors mean that it is viable to manufacture them in this country."

There seems to be thsi arrogant belief that only people in this country can perform high-skilled assembly, or anything that requires skill of any kind. There is nothing inately "skilled" about the British population (look at our footbal teams for example) and we are only as skilled as our education system and our determination to learn enables us to be.

If anyone wanted evidence of the kind of skills our youngsters are leaving school with they only had to pop down to any urban high street last week, except these were not assembly skills - quite the opposite in fact.

Comment number 227.

United Dreamer17th August 2011 - 16:48

#193 - Villaman - alas they really do have the brightest working for them. There are number of first class honours mathematicians and even Maths PHds in the business. I don't agree with the trend but there is no denying their intellect.

Comment number 226.

Up2snuff17th August 2011 - 16:46

re #2001. So-called State support:a. BoE is a lender of last resort to banks. b. Taxpayer does not subsidise banking.2. Gatekeeping:a. BoE has had a regulatory role, changed at various times by Govt.b. The last time I looked Gilts were not sold in a closed auction.c. Basel III not yet implemented apart from anything else in your comment.3. Expert Advantage. So, are you saying that someone with specialist knowledge cannot 'create wealth' via employment?4. Agreed if you mean directly. But what you refer to is political decision by Govt, not City.

Comment number 225.

Ex Tory Voter17th August 2011 - 16:40

By a 'Henry' - they manufacture in the UK and provide, with their supply chain, jobs that actually get people off the dole. A few engineers does not help the mass unemployed that everyone is so critical of.

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